Regulators in SBC Ameritech's five-state region--Illinois, Ohio, Michigan, Indiana and Wisconsin--have set wholesale rates in recent months that are among the lowest in the nation. Rates in all five states except Wisconsin are below the national average wholesale rate, and Wisconsin's are under review and likely to decline.

SBC Chairman and CEO Edward Whitacre called the pricing practice "nuts" when he talked to Wall Street analysts last month, and he is hoping to persuade Illinois politicians and policymakers to see things his way when he visits the state on Tuesday. Mr. Whitacre says the government-mandated rates are so low that SBC can't even cover its costs, let alone make enough money to spend on upgrading the network.

Rivals and consumer advocates laud the low rates for sparking competition in the local residential market, the last bastion of SBC Ameritech's monopoly. With the telecom industry in the doldrums and money for building networks scarce, competitors say they need cost-effective access to SBC Ameritech's "last mile"--the phone lines going into each home--to operate.

Known in the telecommunications industry as the unbundled network element platform, or UNE-P (pronounced "un-ee-pee"), the rates determine what SBC Ameritech competitors must pay to access its phone network.

"There really is no other way for these competitors to offer service than through UNE-P at this point," says Martin Cohen, executive director of the Citizens Utility Board, a Chicago-based consumer watchdog. "We do want to see competitors make investments in alternate networks over time. But for now, we're in a transition phase that is proving to be longer than anticipated."

Complete coverage of this story appears in the Sept. 2 issue of Crain's.